The devil is in the details

When we first started installing Quote & Print over 20 years ago we routinely came across managers whose sole management tool was the balance in their cheque account. If they had a high balance then things were going well. If the balance was low then it normally meant that they had to chase a customer for money or needed to delay payments to their creditors

Five years later I was still encountering the same managers. They would drag me across to the window in their office overlooking the factory floor, point out how busy everybody was and lamented the fact that they had no money in their bank account. The problem was that margins on print jobs had started to shrink so a busy factory was no longer a guarantee of a healthy bank balance.

Fortunately there was an easy way out of this predicament.

The first step was to review their estimating standards. Were the impressions-per-hour correct for their presses? Were the make-ready times realistic? Following this, it was time to adjust the hourly rate for each procedure. Did each machine recover its direct costs plus its share of indirect costs? Were there any items left out such as packing and delivery charges? Were markups appropriate for the segment of the market they were operating in? Once this was achieved then the managers could be reasonably confident that they were making a profit on the jobs that they won.

The next step was to actually record the time taken and the materials used to produce each job. Without a management system like Quote & Print this was usually impossible or too costly to do.

The third step was to analyse all jobs completed in a month. Management reports would quickly identify the 10 per cent or so of jobs that cost more or took longer to produce than estimated. The reasons for this were identified and corrective action taken.

The last step was to increase sales. Sales reps' commissions could be linked to profit or margins on a job rather that the total value. This would reduce the motivation to slash prices purely to get the job. Your most profitable and least profitable customers could be identified and handled accordingly and your worst performing sales reps could be mentored to help them improve their performance.

The good news is that these steps still work today. This type of review or company audit should be carried out at least every year with the results being compared with the previous year. You may or may not like what you find out but at least you will know the direction your company is heading in.